Recap of Jim Cramer's radio show on Wednesday August 18. Click on a stock ticker for more analysis:
Conference Call Savvy: Sprint Nextel (NYSE:S) and Energizer(NYSE:ENR) - Cramer suggests doing homework on a stock before buying, particularly by looking at a company's conference calls. However, he adds that it is important to know when the information presented in a call is reliable or when management is "snowing" listeners. He uses the Sprint Nextel call as an example of a report which sounded promising initially, but which fell apart during the Q&A session. When companies talk about guidance, more is better, says Cramer and that buybacks are a good indication of confidence, however, he says to look out for buyback strategies, like those used by ENR, which create the impression of "false growth." "I also like to hear about what pace of acceleration or deceleration the revenues are at," he said. "Accelerated growth is fantastic."
"Ten Commandments of Trading" -
1. Never turn a trade into an investment - It is important to know why you are buying a stock and to write down these reasons. If you are purchasing a stock because of a catalyst which you anticipate will raise the stock, you must sell it as soon as the event has occurred or if it is clear that it will not materalize.
2. Your first loss is your best loss - It is better to get out of a stock as soon as you realize that it is not working for you than to incur greater losses by giving it a chance.
It's OK to take a loss when you already have one - Don't be in denial about a loss just because it is merely on paper;"a loss is a loss whether it's realized or unrealized," and it is not possible to make a comeback from a chronic loss.
4. Never turn a trading gain into an investment loss - Often trades do not make as much money as investments, and it is important not to hold onto a trade too long, since this is "overstaying of your welcome," and you might end up giving up the profit from your trade.
5. Tips are for waiters - People who give tips are often trying to raise the price of a stock so they can get out, or they might have insider information, which is illegal to use for a trade.
6. You don't have a profit until you sell Paper gains are not real gains, and it is a mistake to delay selling due to fear of taxes.
7. Control losses; winners take care of themselves - "Loss control is the paramount concern for those in the market," said Cramer, and one good stock could ruin a portfolio. Don't fool yourself into thinking that you can't sell a declining stock until it makes a comeback; people who lose money think this way.
8. Don't fear missing anything- Investment discipline means "admitting that you missed the golden opportunity," he said. Don't try to participate in the rally after the rally is over."
9. Don't trade headlines - News stories tend to be written in haste and rarely contain wisdom about the markets. The phrase "better than expected" is a red flag, and an investor should read conference calls and press releases rather than newspapers before making decisions.
10. Don't trade flow - Buying a stock only according to other trades on the upside is "trading flow," is based on ignorance, and will cost money, especially since there is no indication of when to sell.
More: Cramer's latest stock picks, including: Mad Money Recap, Lightening Round, Stop Trading and his Radio Show.
Get Cramer's Picks by email -- it's free and takes only a few seconds to sign up.